Japan warns on ‘interests’ after Russia gas project decree

Japan’s energy “interests must not be undermined”, Tokyo said Friday, after Moscow issued a decree transferring operations of a key oil and gas project to a new Russian company.

Japanese trading houses Mitsui and Mitsubishi Corp own 12.5 and 10 percent stakes respectively in the Sakhalin-2 project, but the future of their investments appears uncertain after the Russian move.

The decree calls for the establishment of a new Russian operator and requires existing foreign shareholders to apply for the right to participate in the new firm, with Moscow deciding on their inclusion. Japanese government spokesman Seiji Kihara said Friday morning that Tokyo was “closely examining the impact on liquified natural gas (LNG) imports”.

“Speaking generally, we believe our resource interests must not be undermined,” he added, declining to give further comment. Later Friday, Prime Minister Fumio Kishida said the government did not think the decree “will immediately stop LNG imports,” on which Japan is heavily dependent.

“We think we need to carefully monitor how the decree will affect our contract,” he told reporters. Japan’s economy minister meanwhile said Tokyo would look into alternative suppliers.

“In the mid-to-long term, we will do everything we can to ensure a stable supply of energy, including through alternative procurement from LNG suppliers other than Russia, buying from the spot market, and reducing demand when necessary,” Koichi Hagiuda told journalists.

He said Japan would also look into boosting renewable and nuclear energy, which remains controversial in the country after the 2011 Fukushima disaster.

The Russian decree says the move is a reaction to the “unfriendly actions” of countries that are imposing “restrictive measures” on Russia over its invasion of Ukraine. It warns the Russian government will carry out a “financial, environmental and technical audit” of foreign stakeholders and identify any “damages” they have caused.

Those accused of such damages may be obliged to pay unspecified compensation, it adds.

Energy resource-poor Japan relies heavily on LNG imports and had previously ruled out withdrawal from the Sakhalin-2 project despite joining Western-led energy sanctions on Russia over the invasion of Ukraine.